With speculation growing that the RBA could be set to make further cuts to the official cash rate in the coming months, a growing number of borrowers are opting for variable rate home loans, according to national new home loan approval figures from Mortgage Choice.
Variable rate home loans jumped to their highest level since February 2013, accounting for 73.14% of all home loans written in September.
Of the variable rate products, on-going discount rate loans again proved the most popular amongst borrowers, with these loans accounting for 39.52% of all loans written.
Mortgage Choice spokesperson, Jessica Darnbrough, says it’s unsurprising to see so many homebuyers choosing variable rate home loans, especially given the competitiveness amongst lenders.
“Interest rates are currently at historically low levels and there is evidence to suggest they could fall further still. Lenders are not only competing aggressively for market share through very sharp pricing, but other incentives as well, including fee waivers, refinance rebates and cash-back offers to name but a few,” she says.
“With this in mind, it is not unreasonable for borrowers to opt for a variable rate home loan.”
While variable rate home loan approvals are on the rise, fixed rate demand slipped to an eight-month low of 26.86%. Interestingly, Queensland was the only state that didn’t record a drop in approvals for this loan type, with fixed rate demand jumping 4.24 percentage points to 36.40%.
“It seems borrowers in Queensland are still feeling uncertain about current economic conditions and so are keen to lock in rates now rather than relying on a further rate cuts,” says Darnbrough.
“By locking into a fixed rate, borrowers are provided with a level of certainty and stability – something Queenslanders appear to be calling out for.”